RAJ KUMAR SINGH HUKAM CHANDJI versus COMMISSIONER OF INCOME-TAX MADHYA. PRADESH

Citation: [1971] 1 S.C.R. 748 · Decided: 11-08-1970 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Appeal(s) allowed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

748 
RAJ KUMAR SINGH HUKAM CHANDJI 
v. 
COMMISSIONER OF INCOME-TAX MADHYA. PRADESH 
August 11, 1970 
[J. C. SHAH, K. S. HEGDE AND A. N. GROVER, JJ.J 
Indian Income-tax Act (ll of 1922)_.;_Remuneration as Managing 
Director-Whether assessable as income of individual or of Hindu 
un· 
divided family. 
A Hindu undivided family carrying on management of a company dis-
rupted into 3 branches, one being that of the assessee, and the shares of 
tne company were more in the names of his 
family 
members. The 
consideration for all these subsequent acquisitions was from the Hindu 
undivided family funds. 
All the shares-the previous 
and subsequent 
acquisition-were treated in the books and the balance shee of the assessee 
family as its property and its dividends were also credited to the account 
of the family. 
As Managing Director of the company the assessee re-
ceived certain remuneration. On the question whether the managing 
director's remuneration received by the assessee was assessable in his 
individual hands or in the hands of the assessee's Hir·"· un.divided family, 
this Court :-
HELD :-The remuneration was assessable as the assessee's individual 
. income and not as the income of his Hindu undhidoo family. 
A 
B 
c 
D 
The broad principle that has to be applied in such cases is whether the 
remuneration received by the coparcener in substance though not in· form 
was but one investment of the family funds in the busi"ess or whether 
E 
it was a compensation made for the services rendered by the individual 
coparcener. If it is the former, it is an income of the Hindu undivided 
family but if it is the latter then it is the income of the individual copar-
cener. 
If the income was essentially earned as a result of the funds in-
vested the fact that a coparcener has rendered some service would not 
change the character of the receiot. 
But if on the other. hand it is cssen .. 
tially a remuneration for the services rendered by a coparc&ier, the circum· 
stances that his services were avaHed of berause of the reason that he was 
F 
a member of the family which had invested funds in th•t busine<s or that 
he had obtained the qualification shares from out o' the family funds 
would not make the receipt, the income of the Hindu undivided family. 
[759 DJ 
Applying the tests enumerated above to the facts found by the tribunal 
in the present case, there was hardly any room to doubt that the income 
in question was the individual income of a<llessee. 
He d;d not become 
G 
the mana~ng director of the firm for the mere reason that his family had 
purchased considerable shares in the firm. He was elected a• a managing 
director by the board of directors. 
The !'"ihunal had found that he re-
ceived his salary for his personal services. There was no material to hold 
that he was elected manaoin~ directe>r On beh•lf of the famiiy. 
In t'1e 
past the salary received by him was assessed a• hidndividual income. The 
same was the case as reoa•ds the s•larv received by the other manaoing 
directors. The tribunal had found that he was not aooointed as manaoing 
H 
director as a result df any outlav or e~oen<ll•ure of or detriment to the 
family orooerty. It had further found that the mon•oing ,i;••ctn·•hip was 
an employment of personal responsibility and ability. [759 OJ 
A 
B 
RAJ KUMAR v. C.J.T. (Hegde, !.) 
749 
Co11unissioner of Jnconie-tax, West Bengal v. Kalu Babu Lal Chand; 
37 I.T.R. 123; Mathura Prasad v. Commissioner of Income-tax 60 I.T.R. 
418, Piyeare Lal Adhishwar Lal v. Commissioner of Income-tax, 40 I.T.R. 
17; V. D. Dhanwatey v. Commissioner of [ncome-tax M.P. 68, I.T.R. 365; 
M. D. Dhanwatey v. Commissioner of Income-tax M.P. 68, I.T.R. 385; 
S. RM. CT. PL. Palaniappa Chettiar v. 
Commissioner of Income-tax, 
Madras 68, l.T.R. 221; Comn1issioner of lncon1e-tax, Mysore v. Gurunath 
Dhakappa. 72 I.T.R. 192 P. N. Krishna Iyer v. Commissioner of Income-
tax Kerala, 73 I.T.R. 539, an<l Conunissioner of lnco111e-tax, Mysore v. 
D. C. Shah, 73, l.T.R. 692, explained. 
Principle laid down in Gok11l Chand v. H11kwn Chand Nath Mal, 48, 
I.A. 162; held no more valid. 
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 326 and 
c 
327 of 1967. 
Appeals from the judgments and orders dated May 3, 1966 
of the Madhya Pradesh High Court in Misc. Civil Cases Nos. 186 
of 1963 and 39 of 1964. 
M. C. Chagla, Ashoke Chita/e and Rameshwar Nath, for the 
D 
appellant (in both the appeals). 
E 
F 
G 
H 
S. C. Manchanda, G. S. Sharma, R

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